Thai bond market encounters global economic pressure

Meanwhile, the yields of medium-to-long-term bonds (over five-year maturity) increased in the range of +0.10 per cent to +0.24 per cent in the first two weeks, after yields rose in other countries such as the United States and Germany.

However, in the second half of last month, market uncertainties following Greece’s debt crisis resulted in a slight decline of long-term bonds’ yields. By month-end, 10-year Thai bond yields increased 0.19 percentage point from May (from 2.77 per cent to 2.95 per cent).

The year-to-date return from investing in government bonds, measured by the Government Bond Total Return Index as of June 30, was +1.29 per cent. Year-to-date return from investing in corporate bonds, measured by Corporate Bond Total Return Index, was +2.49 per cent.

In June, there was a net outflow of foreign capital from the bond market totalling Bt8,208 million. The outflow was a result of Bt3,034-million net buy in long-term bonds and Bt11,243-million net outflows from short-term bonds, mostly due to bond selling.

From year-to-date data (January to June), there was an outflow from the Thai bond market totalling Bt59,519 million resulting from capital outflow in long-term bonds of Bt14,508 million and outflow of short-term bonds totalling Bt45,011 million, mostly due to bond expiration.

Looking forward, as the MPC decided to keep the policy rate unchanged on June 10, the short-term bond yields should remain stable. However, global economic situations, which include the concern over the US Federal Reserve raising interest rates and the unresolved Greek debt crisis, will be the major factors affecting the movement of foreign capital in the Thai bond market, which may result in rising long-term bond yields.

Kantiros Rangkasikorn is analyst officer, research and development department, Thai Bond Market Association.